If I were at work, I would look up the legal filing.
Without reading the complaint, I can only speculate. I suspect, however, the author of this article is confused. The article starts off by talking about a Chapter 11 filing. Then it mentions Chapter 7. I am guessing the business originally filed Chapter 11 in an attempt to reorganize its business. That attempt failed, so it converted the Case to a Chapter 7 liquidation Bankruptcy.
In a Chapter 7, only the Bankruptcy Trustee can recover preference payments. The preference payments are then distributed to creditors, including Apple. So, the only way Ultimate Acquisition Partners receives money is if it is a creditor of Ultimate Electronics.
Since Corporations are treated as individuals under the law, it is possible Ultimate Acquisition Partners as a separate legal entity is a creditor of Ultimate Electronics another separate legal entity even though Ultimate Acquisition Partners may own Ultimate Electronics. For example, Ultimate Acquisition Partners may have loaned Ultimate Electronics money. It happens all the time where people loan their businesses money.
So to answer your question, yes, it is possible Ultimate Acquisition Partners will receive payment.
Quote:
Originally Posted by estyle
TBell - does Ultimate Acquisition Partners get some of this - are they allowed payments as owners of Ultimate Electronics?
I would think that owners don't qualify as creditors...
That's exactly correct. I had the same issue last year with a small chain of stores. Besides being a graphics supplier for them, I was also good friends with a vice-president. He was aware they were struggling, but wanted to be sure I was paid. A few weeks later they were forced into bankruptcy by one of their banker's and yes, the court ordered we return the several thousand dollar check we received just before the filing.
It hurt.
Did they force you to return ALL the money? If you didn't get anything for your work, that is really unfair.
Quote:
Originally Posted by TBell
I am a bankruptcy attorney so I think I am qualified to answer.
When a party files bankruptcy the party is referred to as a Debtor. The Debtor files a Petition asking the Court from Protection from its creditors. There are different types of Bankruptcies. The company here filed a Chapter 7 Bankruptcy, which means the company is being liquidated. Essentially all the companies assets are placed into trust for the benefit of the creditors. Any assets the company has are sold for the benefit of the company's Creditors. The person responsible for doing the liquidation on behalf of the Creditors is called a Bankruptcy Trustee. This person is essentially a private attorney appointed by the Department of Justice.
The merchandise Gatorguy and Apple delivered would be part of the liquidation. That would reduced in the amount they are trying to claim?
Did they force you to return ALL the money? If you didn't get anything for your work, that is really unfair.
For practical purposes it was all of it. I'd have to get the actual from accounting, but off the top of my head we repaid close to 90% of it. And no I didn't think it was fair, especially since they made a big advertising push (using my supplied media) intended to help them avoid the bankruptcy filing. I don't think they anticipated a bankruptcy at all, instead expecting their primary banker to work with them.
My understanding just from reading the article is that the inventory was sold already. So there is nothing in terms of inventory to liquidate.
Yes, Apple would be required in theory to return the whole amount received if the amount Apple paid was in fact a preference payment. In practice if the amount is a preference payment, Apple will likely be able to negotiate the amount down. The Trustee doesn't want to spend resources fighting Apple. He will take a reasonable settlement. Apple has the best attorneys money can buy. If there is an argument it can make the money isn't a preference payment, it will make the argument. Worst case scenario is Apple probably will settle the matter for something significantly lower.
In theory, it isn't unfair that Apple has to return the whole amount if Apple was paid at the expense of other creditors. It seems in this case though Company A owned Company B. Company A loaned Company B money. Now Company A is considered a creditor of Company B. Company A will likely be entitled to receive some of the money Apple was paid by Company B if the money Apple received was in fact a preference payment.
Apple might have some arguments to make that it doesn't have to return the funds. For instance, the money wasn't a preference payment. It might decide it is cheaper to settle.
Quote:
Originally Posted by lightstriker
Did they force you to return ALL the money? If you didn't get anything for your work, that is really unfair.
The merchandise Gatorguy and Apple delivered would be part of the liquidation. That would reduced in the amount they are trying to claim?
Typically these things get settled for far less. A Trustee would have to sue you in Bankruptcy Court to recover the funds if you refused to pay. This costs money and time that the Trustee will not recover if he or she losses. Further, if the Trustee wins, the Court likely will not allow those costs to be added to the amount owed. So, more times then not, the Trustee will settle.
Quote:
Originally Posted by Gatorguy
For practical purposes it was all of it. I'd have to get the actual from accounting, but off the top of my head we repaid close to 90% of it. And no I didn't think it was fair, especially since they made a big advertising push (using my supplied media) intended to help them avoid the bankruptcy filing. I don't think they anticipated a bankruptcy at all, instead expecting their primary banker to work with them.
Typically these things get settled for far less. A Trustee would have to sue you in Bankruptcy Court to recover the funds if you refused to pay. This costs money and time that the Trustee will not recover if he or she losses. Further, if the Trustee wins, the Court likely will not allow those costs to be added to the amount owed. So, more times then not, the Trustee will settle.
TBell - thanks for offering your experience and expertise in this!!
Actually your analogy is off base. The rule only applies to creditors. If I go into a store today and buy a TV outright, the party I bought the TV from is not a creditor. In exchange for the money, the party gave me a TV. I did not owe it money at the time of purchase. There was no loan.
It will be interesting to see if that sort of 'purchase' is how Apple tries to defend the payment they received. Basically that they sold this company a chunk of product with the rights to resell it at a higher price etc. If the company was not able to resell the product, that would not be Apple's fault. But Apple was owed for the 'outright' purchase and that was what they were paid. It was not a 'loan' situation, Apple might try to say.
As I understand it, that sort of 'you can buy it from us for less than what the customers pay and resell it at that customer price' game is how they handle all their partners. And if that is true then they might be able to pull out said defense. I am curious to see.
I was once a management consultant for a company that entered bankruptcy. In the days before the bankruptcy, the owner of the corporation paid himself money that he was owed by the corporation. Those payments were ripe for a "preferential payment" clawback. He'd taken money out of the corporation for his own benefit that belonged to all of the unsecured creditors.
Comments
Without reading the complaint, I can only speculate. I suspect, however, the author of this article is confused. The article starts off by talking about a Chapter 11 filing. Then it mentions Chapter 7. I am guessing the business originally filed Chapter 11 in an attempt to reorganize its business. That attempt failed, so it converted the Case to a Chapter 7 liquidation Bankruptcy.
In a Chapter 7, only the Bankruptcy Trustee can recover preference payments. The preference payments are then distributed to creditors, including Apple. So, the only way Ultimate Acquisition Partners receives money is if it is a creditor of Ultimate Electronics.
Since Corporations are treated as individuals under the law, it is possible Ultimate Acquisition Partners as a separate legal entity is a creditor of Ultimate Electronics another separate legal entity even though Ultimate Acquisition Partners may own Ultimate Electronics. For example, Ultimate Acquisition Partners may have loaned Ultimate Electronics money. It happens all the time where people loan their businesses money.
So to answer your question, yes, it is possible Ultimate Acquisition Partners will receive payment.
TBell - does Ultimate Acquisition Partners get some of this - are they allowed payments as owners of Ultimate Electronics?
I would think that owners don't qualify as creditors...
That's exactly correct. I had the same issue last year with a small chain of stores. Besides being a graphics supplier for them, I was also good friends with a vice-president. He was aware they were struggling, but wanted to be sure I was paid. A few weeks later they were forced into bankruptcy by one of their banker's and yes, the court ordered we return the several thousand dollar check we received just before the filing.
It hurt.
Did they force you to return ALL the money? If you didn't get anything for your work, that is really unfair.
I am a bankruptcy attorney so I think I am qualified to answer.
When a party files bankruptcy the party is referred to as a Debtor. The Debtor files a Petition asking the Court from Protection from its creditors. There are different types of Bankruptcies. The company here filed a Chapter 7 Bankruptcy, which means the company is being liquidated. Essentially all the companies assets are placed into trust for the benefit of the creditors. Any assets the company has are sold for the benefit of the company's Creditors. The person responsible for doing the liquidation on behalf of the Creditors is called a Bankruptcy Trustee. This person is essentially a private attorney appointed by the Department of Justice.
The merchandise Gatorguy and Apple delivered would be part of the liquidation. That would reduced in the amount they are trying to claim?
Did they force you to return ALL the money? If you didn't get anything for your work, that is really unfair.
For practical purposes it was all of it. I'd have to get the actual from accounting, but off the top of my head we repaid close to 90% of it. And no I didn't think it was fair, especially since they made a big advertising push (using my supplied media) intended to help them avoid the bankruptcy filing. I don't think they anticipated a bankruptcy at all, instead expecting their primary banker to work with them.
Yes, Apple would be required in theory to return the whole amount received if the amount Apple paid was in fact a preference payment. In practice if the amount is a preference payment, Apple will likely be able to negotiate the amount down. The Trustee doesn't want to spend resources fighting Apple. He will take a reasonable settlement. Apple has the best attorneys money can buy. If there is an argument it can make the money isn't a preference payment, it will make the argument. Worst case scenario is Apple probably will settle the matter for something significantly lower.
In theory, it isn't unfair that Apple has to return the whole amount if Apple was paid at the expense of other creditors. It seems in this case though Company A owned Company B. Company A loaned Company B money. Now Company A is considered a creditor of Company B. Company A will likely be entitled to receive some of the money Apple was paid by Company B if the money Apple received was in fact a preference payment.
Apple might have some arguments to make that it doesn't have to return the funds. For instance, the money wasn't a preference payment. It might decide it is cheaper to settle.
Did they force you to return ALL the money? If you didn't get anything for your work, that is really unfair.
The merchandise Gatorguy and Apple delivered would be part of the liquidation. That would reduced in the amount they are trying to claim?
The message is to deliver your product more then 90 days after payment in full.
For practical purposes it was all of it. I'd have to get the actual from accounting, but off the top of my head we repaid close to 90% of it. And no I didn't think it was fair, especially since they made a big advertising push (using my supplied media) intended to help them avoid the bankruptcy filing. I don't think they anticipated a bankruptcy at all, instead expecting their primary banker to work with them.
Typically these things get settled for far less. A Trustee would have to sue you in Bankruptcy Court to recover the funds if you refused to pay. This costs money and time that the Trustee will not recover if he or she losses. Further, if the Trustee wins, the Court likely will not allow those costs to be added to the amount owed. So, more times then not, the Trustee will settle.
TBell - thanks for offering your experience and expertise in this!!
Actually your analogy is off base. The rule only applies to creditors. If I go into a store today and buy a TV outright, the party I bought the TV from is not a creditor. In exchange for the money, the party gave me a TV. I did not owe it money at the time of purchase. There was no loan.
It will be interesting to see if that sort of 'purchase' is how Apple tries to defend the payment they received. Basically that they sold this company a chunk of product with the rights to resell it at a higher price etc. If the company was not able to resell the product, that would not be Apple's fault. But Apple was owed for the 'outright' purchase and that was what they were paid. It was not a 'loan' situation, Apple might try to say.
As I understand it, that sort of 'you can buy it from us for less than what the customers pay and resell it at that customer price' game is how they handle all their partners. And if that is true then they might be able to pull out said defense. I am curious to see.